Daily FX Market Commentary

Andy Harrison

Good morning,

LMAX Close

USDJPY 118.659 | EURUSD 1.24119 | EURJPY 147.274 | AUDUSD 0.82737 | NZDUSD 0.78076 | USDCAD 1.15205 | EURCHF 1.20124 | USDCHF 0.96786 | GBPUSD 1.57311 | EURGBP 0.78901 |

 

Interbank Ranges as of 6am London time

Highs    Lows

USD/JPY               119.21 | 118.50

EUR/USD             1.2411 | 1.2390

EUR/JPY               147.71 | 147.00

AUD/USD            0.8283 | 0.8242

NZD/USD             0.7819 | 0.7770

USD/CAD             1.1551 | 1.1518

EUR/CHF              1.2014 | 1.2011

USD/CHF             0.9694 | 0.96795

GBP/USD             1.5737 | 1.5714

EUR/GBP             0.7889 | 0.7882
For today

• EUR: Early Euro’s saw the market drift to a sub 1.2400 level and then trade around the level for much of the session with reasonable volumes on the move through the figure but unable to do much after the fact. With very little in the way of a move to the 1.2490 areas the market is still likely to be dominated by the few yards holding above that level as an option barrier, through the 1.2500 levels the market still is not exactly open to further moves with offers continuing deep into the 1.25 handle and only frees up once the 1.2600 is pushed through. Downside Light bids down to the 1.2300 levels for the moment with a mixture going through the level and then some strong support appearing as the market approaches the 1.2250 areas a push through these levels leaves possibly stronger support heading into the 1.2200 areas however, if we move to this level one would suspect that the PPI numbers in the US are the problem and those bids may disappear. This will leave the market vulnerable for further medium term losses and a push for the 1.2000 levels over the next week or so if volumes continue into the festive season.
• GBP: Cable has moved in a similar pattern to the Euro dipping from the opening 1.5735 areas to base around the 1.5720 area in very quiet trading for the pair. Topside 1.5760 levels offers the first resistance level with a push through there likely to see weak stops and a test of the 1.5800-20 levels which are likely to be a little stronger however, a push through there opens up a mix over the next 100 pips and possibly a congested range. Downside has light bids down around the 1.5700 area however, a push through there could see further weakness and the light bids around 1.5660 are not going to last and a full push to the 1.5600 better bid areas could hold the market and through that level is likely to see more bids in front of the yearly low.
• JPY: Yesterdays recovery took the market above the 119.50 level however, today could not carry through to test those highs and the market moved off the 118.60 areas to push early into the 119.00-10 areas before testing 119.20 in the Tokyo early session since that point the market drifted back and although an increase in the Industrial production number above consensus sent the market back to touch below the opening levels the market soon recovered back to the 119.00 levels and everything now hinges on Eurozone IP and PPI numbers in the US for any further direction one suspects. Topside offers from 119.80 and through to 120.20 are likely to be stubborn without any impetus from the numbers and in front of that the market is open, a push through on the topside still meets some resistance into the 120.50 areas and without the Tokyo market its difficult to see the market moving through cleanly. Downside has light bids around the 118.60-40 levels and then a mix on a break lower with stronger bids around 118.00 quickly disappearing and stops dominate for a push to yesterday’s lows around the 117.50 area and speculation of short term option plays.
• AUD: The Oz continues to rest around the low end of this year’s range with the 82 cent still looking vulnerable if it can break below 0.8220 areas however, it has to get there and that means a strong set of US numbers one would imagine, for the moment the market has attempted a couple of times to push below the 0.8250 levels moving into the mid 0.8240 areas before moving back again and rising on the JPY IP numbers late in the session to test the 0.8280 levels. Topside now sees profit taking and light offers into the 0.8280-90 areas and a move through the 83 cent level would suggest weak stops similar to those on the break down to open up a test to the 0.8320-30 levels, through those levels the market is still fairly congested and it really needs to break back through 0.8380-0.8400 for any further gains on the day and then it’s still likely to struggle to move higher. Downside 0.8220 now seems to be the strong point moving into the figure areas with likely breakout players willing to sell on a push through however, the downside is less than clear and you have to go back to 2010 to see any corresponding levels however, having broken 82 cents the market has the ability to then push below 80 cents with minor support likely on a move to below 81 cents.

Overnight News

JPY:

BOJ’s Kuroda Says 2% Inflation in Sight, Nikkei Reports

Abe’s Party Seen Winning > 300 Lower House Seats, Nikkei Says

Japan Ruling Parties Seen Taking 2/3 Lower House Seats: Yomiuri

CNY:

China Nov. Industrial Output Rises 7.2%; Est. 7.5%

China Jan-Nov property investment growth eases to 11.9 YoY

China Growth Won’t Likely Drop Below 7% in Short Term: Sec. News

China Cuts 2015 GDP Growth Target in Work Conference: Bus. News

China Bank-Loan Estimates May Fall Short of Government Target

China May Release Detailed New Silk Road Plan Soon: Sec. Journal

China May Change ‘Monetary Conditions’ Next Year: Sec. Journal

USD:

House Passes U.S. Government Spending Bill after Day of Discord

AUD:

Mid-Year Review to Show Larger-Than-Forecast Deficit, Sky Says

NZD:

NZ Inflation Remained Benign in November, ANZ Prices Gauge Shows

NZ’s Fonterra cuts supply forecast due to lower prices

EUR:

EU’s Juncker Seeks ‘Known Faces,’ No ‘Extremists’ in Greece: ORF

Today’s data

Actual = A | Consensus = C | Previous = P | Revised = R All timings GMT

NZD       Business NZ Manufacturing Index Nov A 55.2 | P 59.3 | R 58.9

JPY         Industrial Production M/M Oct (F) A 0.40% | C 0.20% | P 0.20%

CNY        Fixed Assets Ex Rural (YTD) Y/Y Nov A 15.80% | C 15.80% | P 15.90%

CNY        Retail Sales Y/Y Nov A 11.70% | C 11.50% | P 11.50%

CNY        Industrial Production Y/Y Nov A 7.20% | C 7.50% | P 7.70%

10:00     EUR        Eurozone Industrial Production M/M Oct C 0.20% | P 0.60%

10:00     EUR        Eurozone Employment Q/Q Q3 C 0.20% | P 0.20%

13:30     USD       PPI M/M Nov C -0.10% | P 0.20%

13:30     USD       PPI Y/Y Nov C 1.40% | P 1.50%

13:30     USD       PPI Core M/M Nov C 0.10% | P 0.40%

13:30     USD       PPI Core Y/Y Nov C 1.80% | P 1.80%

14:55    USD       U. of Michigan Confidence Dec (P) C 89.7 | P 88.8

Harry Hindsight              

• EUR: A day at the races with plenty of volatility on the day to get the blood flowing, opening around the 1.2445 levels the market edged up to the 1.2450 levels then into the Tokyo opening moved quickly higher triggering stops and a quick move into the 1.2490 areas only to meet option barriers in sufficient size to hold the market for over an hour before the buyers disappeared and the market started to tumble back to the 1.2450 point. With the moves over with in the first 2 hours the market then drifted steadily over the course of the session into the 1.2430’s and the grey hours. The buying resumed and the market made it to the upper 1.2480’s before again slipping back quickly into the London opening, the market pushed back to the 1.2420 levels this time and struggled off the level in the run to NYK where good selling appeared and the USD started to recover the losses it had seen over the previous 24 hours. The market slipped all the way back to the 1.2370 levels before holding and remaining in the 1.2370-1.2410 range into the close.
• GBP: As with the Euro the Cable was on a little bit of a level going into the close and the break through the 1.5720 area triggered weak stops to lead the market against the USD and as they say the rest was history for the Euro, Cable managed to push through the 1.5750 levels and only struggled into the 1.5760 area where the market held and the move reversed as liquidity disappeared in Asia in the pair, the market then drifted in the same manner as the Euro, the GBP lost ground against the Euro however, the EURGBP peaked into the morning session in London around the 0.7955 levels and then went into terminal decline as the reversal of the stop run in 3 different pairings saw the Euro decline further than the Cable and EURGBP pushed back to the 0.7900 level taking out weak stops through the 0.7920 levels close to the opening and then another batch on the push through 0.7900 itself dropping to the 0.7885 levels and holding a tight range into the close. Cable dropped back through the opening 1.5710-20 areas on the opening of the London session and steadied once it hit the 1.5660 levels before rising steadily through the NYK session to finish the day above 1.5730 for a slight gain on the day.
• JPY: With the stop loss run in three different pairs the market in the USDJPY was forced lower from the opening 117.80 areas to trade through 117.50 however, once the run was over the USDJPY started the rally for the USD and push quickly back above the 118.00 level and into a quiet 117.90-11840 range play into the London session, the market then broke through 118.40 and triggered weak stops in a run to the 118.80 levels and then had to wait for NYK to enter the market for further gains with initial claims declining slightly and retail sales coming in far better than expected and USDJPY rose steadily from there to push through 119.00 and top just short of the 119.60 levels in fairly active trading through the early part of NYK. Once the London session disappeared though the support disappeared and the light profit taking was enough to set the market back and the USDJPY dropped back to the 118.60 levels into the close on light and illiquid market.
• AUD: The Oz moved steadily in pre Tokyo moving from the 0.8330 levels and holding 0.8320 for the two hours before Tokyo’s opening. With a broad selloff in the USD the Oz jumped higher with Oz employment numbers better than expected and a quick run to above the 0.8370 levels before the USD started to regain some of its losses across the board, the Oz drifted then holding the lows into the London session. The market broke below the 0.8300 and weak stops below the figure lead to a deeper move and a test of the yearly lows to touch the 0.8240 level before bouncing however, even though the bounce was some 50 pips the market refused to move away from the level and the good numbers in the US led to a further test this time pushing into the 0.8215 areas before again bouncing this time the market moved into a 0.8250-80 range play for several hours into the close.

Yesterday’s premiership results

Actual = A | Consensus = C | Previous = P | Revised = R All timings GMT

NZD       RBNZ Rate Decision A 3.50% | C 3.50% | P 3.50%

JPY         Tertiary Industry Index M/M Oct A -0.20% | C -0.20% | P 1.00% | R 1.30%

JPY         Machine Orders M/M Oct A -6.40% | C -1.90% | P 2.90%

AUD       Consumer Inflation Expectation Dec A 3.40% | P 4.10%

GBP       RICS House Price Balance Nov A 13% | C 15% | P 20%

AUD       Employment Change Nov A 42.7K | C 15.0K | P 24.1K | R 13.7K

AUD       Unemployment Rate Nov A 6.30% | C 6.30% | P 6.20%

EUR        German CPI M/M Nov (F) A 0.00% | C 0.00% | P 0.00%

EUR        German CPI Y/Y Nov (F) A 0.50% | C 0.60% | P 0.60%

CHF        SNB Rate Decision A 0.00% | C 0.00% | P 0.00%

CAD       Capacity Utilization Rate Q3 A 83.40% | C 82.90% | P 82.70% | R 82.80%

CAD       New Housing Price Index M/M Oct A 0.10% | C 0.10% | P 0.10%

USD       Advance Retail Sales Nov A 0.70% | C 0.40% | P 0.30% | R 0.50%

USD       Retail Sales Less Autos Nov A 0.50% | C 0.10% | P 0.30% | R 0.40%

USD       Import Price Index M/M Nov A -1.50% | C -1.80% | P -1.30% | R -1.20%

USD       Initial Jobless Claims (DEC 6) A 294K | C 295K | P 297K

USD       Business Inventories Oct A 0.20% | C 0.20% | P 0.30%

Good Luck,

Andy